Zero Percent Inter...

February 19, 2016 16:02

There are a number of car financing options available in the domestic automotive market that highly tempts the concerned buyers. Generally, all these schemes are launched and financed by the auto manufacturer or the corporate banks and firms. Among these lucrative schemes is the zero percent car finance, which is being offered by a number of dealerships across India. The main benefit of this type of scheme is that people have the convenience of repaying the loan free of any interest. This means that people don't have to spend extra money on the interest, which is charged on conventional car loans. This type of financing scheme has been initiated on a considerable number of vehicles, be it used cars or new models. However, there are certain myths and facts related to this type of car finance scheme that must be brought to limelight.

Almost all the new cars in India feature the badge of zero percent interest schemes. This type of car finance is usually launched by the auto manufacturer in collaboration with other financing firms. In the zero percent finance case, the auto maker has to pay back the interest on car loans to the financier rather than the people who are availing the scheme. For this to happen, the car maker has to keep up his profit margin on the sales of the car and the same profit is used to pay back as interest. Such a circumstance leads to non-negotiable car rates and models under the zero percent schemes are sold at higher prices.

To avail car loans on zero percent rate of interest, people are generally required to have decent credit scores. If the credit history of the borrower is not up to the expectations of the financier, then the former might not be able to get the loan amount.

There are a number of restrictions in case of zero percent finance schemes and most of these are hidden. This finance scheme usually includes short term loan duration and the entire credit has to be paid within 12 to 15 months from the date of sanctioning. Although the interest on car loans is zero in case of this finance scheme, people might find it difficult to repay the entire amount in such short duration.

The main drawback of these types of car loans is that the prospective buyer can no more ask for any negotiation in the price of the car. In case of conventional loan system, a buyer is still eligible to ask for deduction in the original price of the car but the zero percent finance scheme does not allow this benefit.

It must be also be noted that being devoid of any interest on car loans, the zero percent finance scheme might also lead to the buyer paying hefty amount as down payment. Different dealerships or finance firms have different criteria under which a person is eligible for zero percent financing. These must be checked properly and in case of any duplicity or perplexity, people can always go for the conventional car loan system.